Ascena Retail Group, Inc. reported financial results for its fiscal fourth quarter and full year ended July 27, 2013.
Fiscal Fourth Quarter Results
Net sales for the fourth quarter of Fiscal 2013 increased 27% to $1.198 billion, compared to $940 million in the prior year’s fourth quarter. This growth was driven by the inclusion of a full quarter of the Lane Bryant and Catherines businesses, acquired June of 2012, as well as a total comparable sales increase of 4% for the quarter versus the prior year.
Comparable store sales include stores open for at least one year. Comparable store sales for Lane Bryant and Catherines include sales for all stores that were open in both that period and in the prior.
Gross margin for the fourth quarter of Fiscal 2013 increased to $671.6 million, or 56.1% of sales, compared to $501.6 million, or 53.4% of fourth quarter sales last year on a reported basis.
On an adjusted basis, gross margin for the fourth quarter of Fiscal 2012 was $515.1 million, or 54.8% of sales. The gross margin rate increase on an adjusted basis of 130 basis points was primarily due to reduced markdown requirements, with the most significant improvements at dressbarn and Catherines.
Buying, distribution and occupancy (“BD&O”) costs for the fourth quarter of Fiscal 2013 were $209.4 million, or 17.5% of sales, compared to $156.9 million, or 16.7% of fourth quarter sales last year.
The 80 basis point increase was primarily due to the inclusion of Lane Bryant and Catherines, which have a higher BD&O expense as a percent of sales compared to the ascena legacy brands. The Company also continues to anticipate the capture of certain integration-related efficiencies in its distribution structure over time.
Selling, general and administrative (“SG&A”) expenses for the fourth quarter of Fiscal 2013 were $335.9 million, or 28.0% of sales, compared to $256.3 million, or 27.3% of fourth quarter sales last year on a reported basis.
The 70 basis point increase is largely due to a duplicative overhead structure relating to the acquisition of Charming Shoppes, Inc. (the “Charming Acquisition”), which is also expected to improve as integration work progresses.
Operating income for the fourth quarter of Fiscal 2013 was $58.3 million, or 4.9% of sales, compared to $30.8 million, or 3.3% of sales last year. On an adjusted basis, operating income for the fourth quarter of Fiscal 2013 was $87.0 million, or 7.3% of sales compared to $69.7 million, or 7.4% of sales last year. An improvement in gross margin rate was offset by deleveraging of expenses.
The effective tax rate for the fourth quarter of Fiscal 2013 was 32.6%, compared to 49.1% in the fourth quarter of Fiscal 2012. This decrease resulted from favorable discrete items, largely related to tax settlements, and lower non-deductible items related to the Charming Acquisition.